FR 2024-31775

The document from the Federal Register introduces a proposal by the Cboe EDGX Exchange, Inc. aimed at amending its fee schedule related to the Consolidated Audit Trail (CAT) funding. This proposal seeks to establish a fee rate of $0.000022 per executed equivalent share for 2025, an adjustment purportedly necessary to cover what has been described as "reasonably budgeted CAT costs." The announcement invites public commentary on the proposal, emphasizing the importance of community feedback in this regulatory process.

Overview of Key Points

The proposal was filed with the Securities and Exchange Commission (SEC) on December 20, 2024, and is designated to become effective immediately. Stakeholders are encouraged to submit their views electronically or via mail by January 27, 2025. Such participation is crucial since the SEC will consider these comments in the decision-making process. However, the document does not outline the method by which public comments will be evaluated, thus stirring concerns regarding transparency.

Issues and Concerns

Several issues emerge upon closer examination of the document:

1. Contextual Clarity: The fee rate of $0.000022 per executed equivalent share is presented without comparative data. This makes it challenging for stakeholders to gauge the significance of the change, its historical context, or its impact on overall costs.

2. Justification for the Fee: The document lacks specific details regarding how the proposed fee was determined and whether it represents a necessary expenditure or some potential inefficiency. More transparency in the cost analysis would aid in assessing the fairness and reasonableness of the fee.

3. Budgeting Process: The term "reasonably budgeted CAT costs" is used without much elaboration. Information on how these costs were calculated and whether the budgeting process was equitable and judicious would be beneficial.

4. Stakeholder Impact: There is no explicit discussion of who benefits from the proposed rule change. This raises concerns about whether certain entities might be unduly favored if the fee changes are not well justified.

5. Complex Legal References: The document includes several legal citations and procedural references that might be confusing for the general public. Simplifying or explaining these references would make the document more accessible to a wider audience.

Public and Stakeholder Impacts

The broader public impact of the fee change is uncertain due to the lack of detailed contextual information. If the fee adjustment results in increased costs for industry members, these could eventually be passed down to consumers, potentially affecting market dynamics indirectly.

For specific stakeholders, particularly those within the financial sector, the fee proposal might represent an administrative adjustment towards compliance with the National Market System Plan's requirements. Industry members might view this adjustment negatively if it increases operational costs without clear benefits, while others might see it as a necessary alignment with regulatory standards.

Overall, the proposed rule change reflects a regulatory effort to ensure financial systems are well-funded and compliant with statutory needs. However, the proposal would benefit from greater transparency and clarity to better engage and inform all stakeholders and the public.

The document in question outlines a proposed rule change filed by the Cboe EDGX Exchange, Inc. related to the "Consolidated Audit Trail Funding Fees." It specifies the establishment of a CAT Fee 2025-1 fee rate of $0.000022 per executed equivalent share. This reference to a financial allocation is central to the Exchange's efforts to generate revenue in order to cover the costs associated with maintaining the Consolidated Audit Trail (CAT).

One of the primary issues with the proposed fee rate is the lack of context regarding its impact on the overall costs incurred by industry members. While the document states the fee rate, it does not provide a comparison to previous rates or an analysis of how this rate aligns with the historical costs associated with the CAT. This oversight creates difficulty in assessing whether the fee is reasonable or if it constitutes an undue financial burden on industry members.

Moreover, the document does not detail the justification for setting the specific fee at $0.000022 per executed equivalent share. Without a clear explanation, stakeholders may find it challenging to ascertain whether the proposed fee is necessary or if it results from inefficient budgeting. Understanding these justifications would help evaluate if the fee structure is proportional to the resources required for the CAT's operation.

A further point of contention is how the "reasonably budgeted CAT costs" were calculated. The document does not elaborate on the methodology used to determine these costs, leaving stakeholders uncertain about the fairness and transparency of the budgeting process. A more detailed explanation could offer insights into whether the allocation of funds toward CAT costs is balanced and justified.

While the Exchange invites comments from interested parties, the absence of a defined framework for evaluating these comments raises questions about transparency. It is unclear how the input will be factored into any final determination or modification of the fee rate. Interested parties may be disinclined to contribute feedback if there's uncertainty about how their input will be utilized.

Additionally, the document does not explicitly state who benefits from this proposed rule change. Understanding the beneficiaries of the allocated funds can provide insights into potential favoritism or bias. Without this clarity, stakeholders might have reservations regarding the equitable distribution of costs and benefits stemming from this financial decision.

Overall, the document provides a foundational understanding of a proposed fee rate but requires further elaboration and justification to address potential concerns effectively. Providing more context and transparency would help stakeholders better understand the financial implications of the proposed rule change.